Racing Victoria’s brave new dawn

Racing Victoria Limited chief executive
Rob Hines
says the thoroughbred industry in the state will use newly negotiated powers in the wagering joint venture with
Tabcorp
to wrest control of media rights away from Sky Racing.

The new terms of the Victorian wagering licence, which makes RVL a 50/50 joint-venture partner with Tabcorp from the previous 75/25 split, will allow the industry to separate Tabcorp’s role as a partner in wagering from its Sky media business, Mr Hines said.

Describing the deal as a “new dawn for Victorian racing," the RVL chief said Tabcorp’s minimum performance requirement – to deliver $1 billion to the industry over the first three years of the licence – and an obligation to act in the best interests of the joint venture, would require the company to loosen its hold on international media rights in particular.

Under the previous licence, Tabcorp could effectively block the industry from selling international media rights to offshore wagering operators such as Ladbrokes in the United Kingdom. Tabcorp could also refuse to allow that operator to co-mingle bets into the Victorian wagering pool unless the media rights were bought from Sky, Mr Hines said.

Co-mingling is the practice of one totalisator combining its wagering pool with another to make it more attractive to punters.

“We see Tabcorp as an absolutely crucial wagering partner. We don’t see them as a media partner," Mr Hines said in an interview with The Australian Financial Review before the body’s annual meeting at Mooney Valley yesterday.

“The fact that they have media and wagering vertically integrated causes us grief every day. It works for Tabcorp but it doesn’t work for us.

Tabcorp beat rival
Tatts Group
to the Victorian licence in July, striking a 12-year deal worth $410 million, with the major concession being the change to an equal standing with the industry in terms of profit share.

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In the fight between the thoroughbred industry and Tabcorp’s Sky over media rights – a fight which has already seen Tabcorp reject a $420 million takeover offer from the race club-owned ThoroughVisioN (TVN)– the first major battleground will be over international media rights up for renewal this month.

Under the existing deal between TVN and Sky, domestic media rights for the Victorian thoroughbred clubs are up for renewal next year.

Mr Hines said he would fight for the ability to separate Tabcorp’s control over wagering in the state from negotiations with international wagering operators over access to vision.

In its 2010 report on gambling in Australia, the Productivity Commission said Tabcorp’s ownership of Sky might be stifling competition in the wagering market and should be investigated by the Australian Competition and Consumer Commission.

“As the capacity for punters to view racing events is a key factor of production for wagering operators that compete with Tabcorp, this arrangement may frustrate competitive access to racing broadcasts," the commission said in its report.

In response, Tabcorp has said the relationship between wagering and Sky provides incentives to maximise turnover through the “optimal presentation of wagering product" – a claim Mr Hines and TVN rejected.

For all the talk of a return to the broadcast wars that ended in split vision, with TVN withholding thoroughbred racing content from Sky, the RVL chief executive suggests a compromised resolution is far more likely.

“We will absolutely sell [the rights] to Sky for a reasonable sum in Victoria, but for every other market Sky will either have to pay top dollar or TVN will deliver to those markets," Mr Hines said.

The biggest difference this time around, he said, was the willingness of Tabcorp’s new CEO to discuss a range of possible outcomes. “He’s got a different attitude about competition– he’s prepared to compete and do things rather than just whinge and put protectionist issues up and block. It’s a bit more of a mature relationship."

Tabcorp chief executive David Attenborough said the company was working hard to establish a new partnership with Racing Victoria covering the international rights.

Sky exports integrated vision, data and wagering for Australian racing to 29 countries including the UK, New Zealand, Singapore and the United States daily, boasting that it has increased Victorian thoroughbred export revenue by 40 per cent since 2007.

“For a number of years UK racing was exported by more than one provider, which confused the market and undermined revenues,’’ Mr Attenborough said. “It’s interesting that the UK has reverted to a single export model.’’

Tabcorp’s recently launched Isle of Man wagering gateway can also link many of the world’s large betting pools back into Australia, he said.

Under the new licence, Tabcorp will take a smaller share of joint venture earnings and pay higher product fees to the racing industry on fixed-odds wagering and for its “Trackside" simulated racing product. It will also be responsible for controversial “race fields fees" on non-Victorian product.

RVL said yesterday that it would use the extra $30 million to $40 million that will flow from the wagering licence to increase thoroughbred prize money in Victoria of up to $16 million, beginning in August.

Under the terms of the agreement, Tabcorp estimates its earnings from the licence will drop to $120 million in 2014 from $128 million last year. The $410 million price tag, about 3.4 times estimated earnings, was at the upper end of what analysts had expected. “They were desperate to win and in order to do so they’ve conceded just about everything the Victorian racing industry wanted," Mr Hines said.

To drive growth in wagering turnover, RVL has proposed a program of expansion of pub TABs next year, sharing the cost equally with Tabcorp and adding 70 to 100 new retail outlets in the first year of the licence. Mr Hines said there was scope to add TABs in 400 more pubs in the state over time.